The burgeoning debt levels in UK society are a frequent topic of debate in the media, and with good reason: in August 2007, the debt charity Credit Action estimated that total UK personal debt stood at ?1,345 billion - a 10.2 per cent increase on the previous twelve months. Additionally, average consumer borrowing on credit cards, motor and retail finance deals, overdrafts and unsecured personal loans had risen to a staggering ?4,550 per UK adult in June 2007. But what exactly can be done to curb this growing problem of debt in Britain?
One of the most recent solutions that has been proposed to reduce the blight of debt on UK adults, is the possibility of increasing the minimum age at which people can apply for a credit card to be raised to 21. Debtmatters, a UK debt management specialist, has warned that young people are not taking the steps necessary to make sure that they can actually afford to pay for the goods they are buying on credit.
Michael Shirley, a spokesman for Debtmatters, commented:
"We are living in a buy now, pay later culture... [and] many people consider being in debt to be perfectly normal and nothing to worry about... Raising the legal age at which people have access to credit cards would provide a solution and would buy valuable time in which to agree a sustainable long-term solution."
According to the company, raising the age limit at which you're allowed to means that younger spenders will be forced to think about their financial options before plunging themselves into spiralling debt. Reckless spending and high repayment rates on borrowing early on in your financial life could lead to bad credit ratings and possibly even bankruptcy in later years.
However, with the introduction of top up fees in English universities in 2006 and the increasing cost of living across Britain, it appears that many students are now relying on credit cards to get them through higher education. A recent survey conducted by market analysts Mintel found that 18-34-year olds were more likely to have unsecured debt than any other age group, with 60 per cent owing money on credit cards, loans and overdrafts. Although a vast proportion of this debt is likely to be due to careless borrowing without the means to pay, it's also likely that just as many of these consumers are having to borrow out of necessity.
Nevertheless, Debtmatters claims that the long-term solution to the UK's credit card debt is likely to entail new financial management classes taught at educational institutions, including schools, colleges and universities. These classes would aim to educate the younger generations on the importance of financial planning and the dangers of excessive and irresponsible borrowing. As a result, they're likely to have a positive effect on the way younger borrowers decide to flex their plastic, regardless of whether the legal age to apply for a credit card is raised or not.
Depending on the way you handle your credit card spending, many banks will automatically give you a higher credit card limit after a specified period of time. Some review their credit card holders' accounts on an annual or semi-annual basis and, based on the criteria they specify, may increase limits for certain customers.
If you don't want to wait for an automatic increase, your credit score is good, and you always pay on time, you may be able to increase your limit simply by calling and asking for it. You may be asked to fill out an application for increased credit first. If your request is declined, you can also consider the option of applying for a new credit card with another bank.
The most important thing you can do to get a higher credit card limit is to prove to the bank that you are worthy of an increase. They want to know that you are stable financially and will be able to pay back an increased amount. Here are four tips to help increase your chances of being approved for a credit limit increase by showing what a good borrower you are.
1. Paying on time is one the best ways to increase your chances of getting a higher credit card limit. By paying more than the minimum balance each month, not only do you save on finance charges, but you also put yourself in a good position for becoming eligible for an increase. It's even better if you can pay off the entire balance each month.
2. Stay within your limit. Most credit cards charge a hefty fee for over-the-limit spending. By staying within established credit limits, you are showing you have control over your spending. This reinforces to the bank that you are a good credit risk.
3. Use your card regularly (and not just for emergencies.) If your card is rarely used, it's harder for the bank to get a good picture of your spending and repayment habits. The bank will be more reluctant to increase your credit limit if the card is not used on a regular basis. Of course, you want to spend only within your means. You aren't doing yourself any favors by burying yourself in credit card debt.
4. Don't assume your credit limit will be automatically increased. Many banks do raise credit limits and some don't. If you are taking all the steps listed above, you can call your bank or credit card company and personally ask for an increase. If you have an online account for your credit card, you can also look for a button or link once you log in that will allow you to request a credit line increase.
Keep in mind that with increased limits, it's easy to fall into the trap of increased spending. Be sure you can pay back what you're asking to borrow. Another thing to keep in mind: some people say that calling your bank to ask for a credit card limit increase may actually have a negative effect on your credit score (depending on your other credit risk factors) so make sure to weigh the potential disadvantages against your need to have a higher credit limit
Getting a higher credit card limit has advantages, even if you don't use the full amount. Your ability to buy is greater and there's peace of mind in the knowledge that you have an extra cushion in the event of an emergency. It can also improve your credit rating, particularly if you keep the amount that you owe on the card low (or pay it off each month). Other credit card companies will see that you are a good borrower and that you keep your spending under control.
The bottom line is this: Responsibly using the credit you already have and consistently meeting your current financial obligations is the best way of getting a higher credit card limit in the future.
Both Andrew Regan & Jamie Jefferson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Andrew Regan has sinced written about articles on various topics from Travel and Leisure, Small Business and Modelling. Andrew Regan is an online, freelance author from Scotland. He is a keen rugby player and enjoys travelling.. Andrew Regan's top article generates over 20400000 views. to your Favourites.
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